Putin under pressure as Russia fights uphill battle with coronavirus

The May 9th military parade was to have been an event of pure pomp and spectacle: a moment for Vladimir Putin to stand in the centre of Moscow's Red Square and bask in his unchallenged authority.

Flanked on either side by his Chinese and French counterparts, Xi Jinping and Emmanuel Macron, the Russian president would have watched proudly as Russian soldiers marched past in the spring sunshine, their arms locked in salute and their faces turned to their commander-in-chief.

Instead, Putin will lay flowers at a war memorial in the centre of an otherwise deserted Moscow, and make a video address to a quarantined, concerned and increasingly restless nation.

The postponed parade to mark the 75th anniversary of the Soviet Union's role in the second World War victory over Nazi Germany was envisaged as the most public event of a heavily-orchestrated spring schedule designed to cement the longevity of Putin's 20-year reign.

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Xi would have shown the world the strength of Russia's new friendship with the world's pre-eminent rising superpower; Macron's attendance would have demonstrated that despite sanctions against Moscow for its 2014 annexation of Crimea, Europe still needs its troublesome eastern partner.

The parade of tanks, missile launchers and soldiers was intended to be much more than just a historical commemoration. It was scheduled 17 days after a national ballot where Putin had banked on winning widespread public support for constitutional changes that would allow him to extend his rule beyond 2024. That vote, too, has been postponed.

In the space of two months Covid-19 has laid waste to both his political agenda and the economic model that underpins his regime, turning 2020 from a year scripted to usher in another decade of Putin rule into one that could undermine his supremacy.

“It is pretty clear that this year has not gone to plan at all as far as Putin is concerned,” says one foreign ambassador in Moscow. “The pandemic has had far more of an impact than he had hoped, and the economic fallout from all of this is going to be even bigger.”

Economic shock

The virus has infected almost 135,000 Russians and killed close to 1,300, making the country the world's seventh most affected, according to data from Johns Hopkins University. Putin's own prime minister, Mikhail Mishustin, stepped down temporarily on Thursday after contracting the virus.

It has also sparked a two-pronged economic shock that is expected to shrink Russia’s gross domestic product by as much as 6 per cent this year, according to central bank forecasts. In addition to a six-week national lockdown and crippling quarantine measures that have suffocated domestic industry, the pandemic has contributed to a more than halving of the price of oil, imperilling the country’s financial lifeblood.

Profits from oil and gas sales provide about 50 per cent of Russia's consolidated budget revenue – about $130 billion (€119 billion). Since oil prices plunged, partly due to Putin's ill-fated decision to embark on a price war with Saudi Arabia to hurt US shale producers, a $165 billion war chest built up to protect the economy is being drained by as much as $300 million a day, according to government data. Russia's finance minister has warned that the government could burn through almost half its savings by the end of the year.

That imperative to prop up the budget means promised fiscal measures to support people and businesses affected by the pandemic and economic slowdown add up to just $40 billion or 2.8 per cent of GDP; far less than the trillions of dollars pledged in other countries. Russian lawmakers in March voted to lift the country’s state borrowing limits.

Putin faces a multi-faceted crisis that has shaken his authority and the informal social contract that underpins his rule: to provide security and economic stability to voters in exchange for restrictions on their political freedoms.

Despite attempts to distance himself from the crisis by delegating difficult decisions to his regional governors, Putin’s approval rating has fallen to a six-year low. One measure of public trust in him is at 28 per cent – the lowest since 2006 – just 18 months before Russia’s parliamentary elections.

"It is increasingly evident that Russia's highest political leadership underestimated the risks of Covid-19 and failed to contain the disease at the early stages," says Andrius Tursa, an analyst at political risk consultancy Teneo. "To divert potential criticism for mishandling the crisis, the Kremlin is using the regional governors as scapegoats ... The effectiveness of such tactics, however, appears to be limited so far."

‘Difficult path’

Throughout most of March, as the virus spread rapidly through other European countries, Russian officials insisted the number of infections was low and Putin left the issue to be dealt with by ministers, officials and aides.

On March 25th, after visiting Moscow's main hospital for coronavirus infections, he said in a national address that Russia was "able to restrain both the wide and rapid spread of the disease".

Three weeks – and 42,000 new coronavirus cases later – in a speech to mark orthodox Easter, he remained upbeat. “The situation is totally under control,” he said, boasting of Russia’s “healthy, strong economy”.

Only last week did Putin’s tone shift. In a televised address that extended the national lockdown to May 11th, he admitted “there is a hard and difficult path ahead ... it will not be as fast as we would like. But you cannot race ahead, and risk going backwards”.

"This is exactly what happens when you are constantly told about your successes, and any complaints or problems provoke only bitterness and irritation," says Tatyana Stanovaya, founder of R Politik, a Russia-focused political analysis firm. "To Putin, it seemed that they had achieved the impossible in the fight against coronavirus, and no one would have done it better."

The impact on the population is expected to be severe. Real incomes in Russia will fall by 5 per cent this year, Alfa-Bank economists have forecast. Incomes are already 7.5 per cent lower than in 2014, before Russia’s invasion of Crimea prompted western sanctions against Moscow.

Alexei Kudrin, head of Russia's audit committee and a former finance minister, estimates that the crisis could see unemployment double to 10 per cent. Industrial output already slipped by 2.5 per cent in March and is set to plunge in April, as major factories, mines and plants struggle to operate within quarantine measures and without contractors who have been forced by the government to close down.

The lockdown measures and resulting lay-offs have already provoked protests. Police suppressed a rally in the southern city of Vladikavkaz as people fired from their jobs demanded more compensation than the one-off 3,000 rubles (€36) offered by the local authorities. Protests have also taken place online, with citizens posting thousands of anti-Putin comments at government locations on the Yandex.Maps mobile navigation app.

According to the Levada Center, Russia's sole pollster independent of the state, Putin's approval rating fell to 63 per cent in March, down from 69 per cent in February. While exceptionally high for a European politician, Putin has almost no political opponents, and it is well below the ratings in the high-80s he enjoyed between 2014 and 2018. The state-run VTsIOM found in a recent survey that just 28 per cent of respondents named Putin when asked which politicians they trusted.

Ratings

When asked last week about his handling of the pandemic, only 46 per cent told Levada researchers they thought his decisions were correct. Thirty per cent said they thought his response was inadequate; 18 per cent that it was excessive.

"It is not so much the pandemic itself that affects [ratings] Putin's spokesman Dmitry Peskov told reporters that he "generally and conceptually" disagreed with a statement that economic difficulties could provoke a political crisis in Russia. But a sharp rise in public anger could certainly hamper Putin's bid to rewrite the constitution and grant himself the ability to run for two more six-year terms as president after 2024, when he would otherwise be forced to step down.

The process looked simple before the pandemic. A VTsIOM poll on March 11th, when Russia had 28 coronavirus cases and no deaths, showed 64 per cent of voters supported the change. A poll by the same company on April 17th, with the lockdown in place and case numbers rising rapidly, showed support had dipped to 50 per cent.

“If the vote had taken place on time, the majority would have supported the amendments,” says Volkov. “With growing uncertainty, economic problems and – over time – discontent, people’s desire to go and vote for amendments proposed by the government may decrease.”

Russia now has one of the world's fastest growing Covid-19 caseloads. As France, Austria and other European countries have begun to lift some quarantine measures, Putin has extended those operating in Russia by another fortnight.

Moscow mayor Sergei Sobyanin said on Saturday that according to testing data, 2 per cent of the capital's population was infected with Covid-19. That equates to more than 250,000 people – four times the number that the government has previously admitted are infected in the capital, raising doubts over the efficiency of the four million tests that Russia's government says it has conducted nationwide.

Shoulder to shoulder

After the troops who had assembled for the May 9th parade were sent back to their barracks, the defence ministry admitted that more than 1,000 soldiers had tested positive for Covid-19. Video footage of their rehearsals shows the soldiers standing shoulder to shoulder.

China in April blamed hundreds of new cases on people returning from Russia, either across their shared land border or on flights. One flight to Shanghai on April 11th contained 51 infected people, Chinese officials said, a number that implies a larger proportion of Russians could be affected than the official data suggests.

The handling of the crisis has created wider friction between Moscow and Beijing, a relationship that Putin has sought to promote as ties with the west have soured since 2014. In late January Russia was one of the first countries to close its border crossings with China as the virus spread from Wuhan to other parts of the country, but did not close its western borders with the EU until two months later.

"Moscow was late to shut down its border with the EU, exposing the obvious racism of the Russian elite: China was perceived as 'dangerous' while Europe was viewed as 'safe' despite huge numbers in Italy and Spain, " says Alexander Gabuev, senior fellow at the Carnegie Moscow Center.

“As the number of cases imported from Russia grows, so is Chinese anger. Not only is Moscow hiding – or unable to detect – real numbers of infections, it can’t control movement of sick people and the spread of Covid-19,” he says. “This is likely to boost long-held feelings of Chinese superiority towards Russia and anti-Russian sentiments. In Russia, it’s likely that the virus will reinforce deep-seated Sinophobia.”

Worryingly for the Kremlin, infection data appears to show that the outbreak is spreading fastest in provincial cities and rural regions far from Moscow, which lack both the capital’s medical provisions and financial firepower.

Putin last week reiterated his position that local governors should take responsibility for their regions, and not rely on orders or resources from Moscow. He also warned that even after the country as a whole sees a peak in infections “the situation may remain tense in certain regions ... The threat will not disappear everywhere immediately”.

That could result in a long, drawn-out recession and a stuttering recovery that will further crimp Russians’ spending power, and could erode support for the ruling regime as parliamentary elections in September 2021 approach.

“We see that regarding [support for] Putin and his government as a whole there is a division in society between those who are active, urban and more modernised, and older people,” says the Levada Center’s Volkov.

“I think that this divide will deepen.” – Copyright The Financial Times Limited 2020